Monday, November 29, 2010

Value Pick - Nov 2010 stock research report will be released on 30th November. Value Pick of this month is from auto component industry. The investment rationale for the company is as under:

Investment Rationale

Demand in user industries:

The industry fortunes are linked to the performance of other user industries like automobiles, textiles and general engineering, with automobile accounting for 60% of the total demand. Company is a Tier 1 supplier to large domestic and international auto OEMs with 80% of the revenue coming from automotive sector. Indian automobile market is likely to grow at 17% CAGR till 2012, while the auto components industry is expected to grow at a faster pace at 20% CAGR over the next two years.

Tapping the export market:

India's exports can hit $20-$25 billion by 2015 (39% CAGR) , as nearly 40% of an estimated $1.7 trillion in auto components requirements is likely to be outsourced to low-cost countries by then. India's share in global market is less compared to other countries, which shows a huge growth potential going forward.

Strong clientele base:

Company is a Tier 1 supplier for almost all the auto OEMs in the domestic market. It supplies its product to more than 25 major auto OEM and have received repeat orders from them. Company exports its products to GM, Cummins, John Deere, Delphi, Volvo, Daimler Chrsyler, Rover, JCB, Caterpillar, Proton, Mitsubishi, Komatsu among others.

Strong order book:

Company has a healthy order booking for the FY11 and expects the same to be for FY12.

Over the last two weeks the stock has seen correction. In such a market condition when we are experiencing correction, stock market is giving an opportunity to invest if one can remain invested for period of 12-18 months.

Saral Gyan Capital Services

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